I am building some reference points for my ongoing learning about ancient finances. (If you couldn’t tell, I’m have a lot of fun. This learnin’ thing is cool.)
Here is the value of all the stock listed on the market in the G-20 economies. This is the total capitalization of the companies in those countries.
Data is from this site. A lot of other sources could be used and other years might give different results. The accuracy of the valuation of Alexander’s loot is only accurate to one or two significant digits. The needed estimates and assumptions will leave any comparisons accurate to only one significant digit. Actually, by the time my calculations are finished, the amounts will probably be accurate to maybe overestimating 20% or perhaps underestimating by 100% or 200%.
Thus, more precision in the market capitalizations is irrelevant.
I suggest you are in fact richer today than John Rockefeller was 100 years ago. If it were possible for Prof. Don Boudreaux to switch places with John Rockefeller’s life and even if he could have a billion dollars after he arrived back in 1916, he would not make the switch. He would rather live as a comfortable professor today than be a billionaire 100 years ago.
Here are three posts to explain this strange idea: first, what life was like 100 years ago, why Prof Boudreaux would not make the switch, and then why Coyote Blog wouldn’t either.
(This post may seem to be out-of-place on my blog discussing accounting and auditing topics. This discussion is part of my enjoyable research on ancient finances and a related thread of how much life has improved over the last 200 years. Since I discuss finance at this blog, it actually fits.)
I will update a few of the stats in the Atlantic article where the author took a shortcut. When I browsed through the BLS report, I noticed some sentences which were repeated nearly verbatim in the article, which is okay since the report is a public document.
A few highlights:
Workers in factories averaged 55 hours a week. The fatality rate across the economy was 61 deaths per 100,000 compared to about 3.3 per 100,000 today.
The following numbers are based on purchasing power parity, which is a tool economists use to compare countries across currencies and across time.
Average income across the planet is now $33 a day, which is also about equal to average income in Brazil today or in the US back in 1941.
Income in places like the US and Sweden are 3 or 4 times the planet average.
Average income per person was about $3 a day from about 1800 all the way back until humans first appeared on the planet. Dr. McCloskey says daily income sometimes in some places rose to $6 or $8 for a while but slipped back to the $3 range.
For illustration of what $3 per day looks like, consider Haiti or Afghanistan. In those two places, the current PPP income is $3.
So where does that leave us for a comparison? Consider this purchasing power parity analysis.
$3 – For all of history until about 1800 average daily income was about $3.
$33 – Today average income is about $33 in Brazil or a worldwide average.
$132 – Today average income in the US and Sweden is 3 or 4 times higher than the world average. The specific days point is $132 a day in the US in 2011.
Going from $3 to $132 is an increase by a factor of 44.
..in the two centuries after 1800 the trade-tested goods and services available to the average person in Sweden or Taiwan rose by a factor of 30 or 100. Not 100 percent, understand— a mere doubling— but in its highest estimate a factor of 100, nearly 10,000 percent, and at least a factor of 30, or 2,900 percent. The Great Enrichment of the past two centuries has dwarfed any of the previous and temporary enrichments.
Let me phrase that another way. The value of what is enjoyed today by an average person is roughly equal to what 30 or 100 people had two centuries ago. That means the constant dollar value of what is consumed and enjoyed has grown by a factor of somewhere between 30 and 100.
Update: I have revised my calculations here. Adjusted the value of an Athenian talent from 10 years salary today up to 400 years salary due to the dramatic improvement in our wealth and standard of living in the last 200 years (the Great Betterment). Also adjusted from estimated average wage in the U.S. of $20 an hour to average wage for skilled construction worker of $70,000 per year. That takes the rough valuation from $20 billion to $1,400 billion, or $1.4 trillion. That actually seems to make sense in a very rough way.
Continuing my discussion of a few tidbits of financial information from Alexander the Great’s military campaigns.
When Alexander approached Susa, the capital of Persia, news of his non-stop victories preceded him. Previous cities he captured surrendered before he arrived. That typically spared most citizens their lives and prevented the torching of the city.
Thus, Susa was handed to him without a fuss, except for a huge amount that Darius III carted off well in advance of Alexander’s arrival.
The author looks at the various reports of how much loot was acquired. Integrating the report that is likely to be most reliable with the other reports results in an estimate Alexander capturing a haul of 40,000 talents of uncoined bullion and about 10,000 talents of gold coin. The gold is roughly valued by expressing the amount what it would be in silver value.
Apparently the Persians didn’t cast most of their precious metals into coins, instead preferring to mint what they needed as they needed it.
Revised value of a talent
Multiple changes have shifted the relative value of gold and silver in relation to each other and in relation to their purchasing power. Instead of converting a talent of silver into ounces and converting that to current dollars at current exchange rates, I’ll start looking at piles of money in terms of average days wages.
Warning: I plan to update my valuation of a Talent based on the radical improvement in living standards that has developed since the Industrial Revolution.
If you are curious and want to follow along, I’ll be spending a bit of time looking at some details of ancient finance.
If you are already somewhat familiar, feel free to either roll your eyes as I flounder along or chuckle on how slow I am to catch on. If your knowledge of ancient finances is comparable to mine, that is to say approximately zero, please feel free to join me on a journey to learn a few details.
Article in Wikipedia says some economists and historians say one drachma in the 5th century (let me do a mental calculation – – that would be from about 499BC to 401BC) was about US$25 in 1990 or US$46.50 in 2015.
Classical historians give a different read for the 5th and 4th centuries (okay, mental math time, so that would be from around 499BC to 301BC, the 400s and 300s). In that time, one drachma would be around one days wages for a skilled worker or a hoplite. So that would not be minimum wage, but more along the line of a carpenter or mason.
I have a growing interest in ancient finances. Try thinking about how to run a large operation, such as an empire or an army on campaign when there is no banking system and no means of storing wealth other than controlling territory or possessing gold or silver. There is no way to gain any sort of liquidity. Your ability to buy something is limited to the gold in your hand.
How you pay your army today here in the field or buy supplies for 20,000 troops when your wealth is in the form of tons of gold which is a two-month march behind you?
The primary focus in media coverage is on tax evasion. There are other ways to look at the offshore industry. There are more and deeper legal issues involved. The tax evasion concerns under discussion are just the starting point on the list of issues that ought to generate irritation.
Following articles provide a variety of alternative views of what is going on in the Panama Papers leaks. That the articles I mention contradict each other illustrates my point that there are more issues involved than just tax evasion.
Question for you to ponder: Why have people been hiding their money for over 2,000 years?
In 1934 when Switzerland made it a crime for a banker to reveal a customer’s name, they were a bit behind the curve. Liechtenstein, Luxembourg, and Bermuda were tax havens a couple of decades earlier. As a depressing note, the Swiss offered confidentiality for a fee all the way back in 1789.
When I look at the political news or any news in general I get very pessimistic about our future.
In contrast, when I look at the amazing things happening beyond the headlines in today’s newspaper I feel incredibly optimistic.
Consider that private companies are developing the technology for space exploration. Consider the energy revolution created by hydraulic fracturing and horizontal drilling. Consider radical changes in technology that are making so many things easier, faster, and cheaper. Consider that anyone that wants to do so can publish their own book, distribute their own music, or create a feature movie.
As a tiny illustration, look at my company and pastimes. Technology allows me to run a high quality CPA practice without any staff. In my spare time I am a publisher and journalist. Anyone in Europe or North America or most of Asia could easily do the same and at minimal cost.
Until relatively recently, an illness-filled short life of dirt-eating poverty was the normal condition for practically everybody on the planet. In the last 100 or 200 years life has gotten radically better for practically everyone.
Over 5.1M views of the first video in the series and just a few more views to cross the 3M point for the second. Check them out for entertaining, creative ways of explaining the views of Hayek and Keynes. Great contrast between the two.
Just like money funds disintermediated (that means cut out of the picture) bank deposits in the distant ‘80s, bitcoin and other yet-to-be-invented digital currencies will disintermediate a huge portion of the financial system.
Picture the long series of transactions when you buy a cup of coffee at the corner shop with your credit card (this is a long quote cited under fair use, oh, also to promote the book it is extracted from): …